14 October 2016

The 309 page report of the 'Duckett Inquiry', ie Targeting zero: Supporting the Victorian hospital system to eliminate avoidable harm and strengthen quality of care -
Report of the Review of Hospital Safety and Quality Assurance in Victoriastates

This review’s terms of reference were expansive. The review was charged with examining whether the department has adequate systems for safety and quality assurance in place and (where systems were found to be inadequate) recommending how they might be improved to achieve contemporary best practice, as seen within other jurisdictions and internationally.

We were to assess the department’s systems for all in-hospital care, including mental healthcare, in both the public and private sectors.

In particular, we were asked to consider governance issues pertaining to the following issues:

• how the department should ensure that all boards of public health services and public hospitals are capable of providing appropriate local governance of safety and quality

• what systems the department should have in place to ensure robust monitoring of safety and quality at the hospital and health service levels including its approach to monitoring clinical governance at health services and its performance management framework to monitor clinical safety and quality in local health services

• what information about safety and quality should be reported to the department, and how the department should use that information including through public reporting

• whether the scope of the reporting to the department should be differently configured in public health services as compared with public hospitals, and what the scope of reporting for private hospitals should be.

We considered these along with information flow issues pertaining to:

• the role of the department in monitoring safety and quality in Victoria’s public hospital sector

• the type of information that should be available to boards and chief executive officers to assist in local monitoring of quality and safety

• the implementation of the Victorian Health Incident Management System (VHIMS) improvement project

• the relationships and information flows between the department and various other bodies with responsibility for the quality of care

• the relationship and information flows between the department and private hospitals regarding quality and safety.

We also examined clinical engagement and leadership issues pertaining to:

• the best approach for providing clinical leadership, advice and support to the new Chief Medical Officer that will strengthen the department’s oversight of quality and safety systems

• strategies to optimise the department’s response capacity and engagement in promoting an improvement culture among management and clinicians

• how the department should participate in and provide leadership to the safety and quality agenda, particularly in improvement, including through enhanced clinical engagement.

Our terms of reference note that some public hospitals are too small to have dedicated comprehensive safety and quality teams or clinical expertise in board members; many only have limited access to medical administration expertise. This is in some respects an anomalous feature of the Victorian system, which has a very large number of unremunerated independent boards for very small public hospitals in rural areas. We have not commented on the optimality of this model but rather have focused on recommending ways to strengthen it so the community can be assured of the same safety and quality of care in small rural services as in larger regional and metropolitan services.

A patient’s experience of care critically depends on the quality of their interaction with the clinical team. So too more broadly, does the overall safety and quality of the Victorian health system depend on clinicians, managers, boards and the oversight of the department. This report’s focus was governance of safety and quality of care in Victoria by the latter. We did not assess the governance of safety and quality within hospitals, except as it was affected by the overall system governance issues. Similarly, our recommendations focus on what the department can do to strengthen care. As we show, it can do a lot. Ultimately, however, it is those at the front lines of care that are best positioned to drive a system-wide transformation. Change of this kind needs to engage clinicians and be embraced by them.

The report's summary of findings is

1. Across all modern health systems, and despite concerted efforts, avoidable patient harm and variability in care occurs that no one should be prepared to accept. Avoidable patient harm means that patients suffered not through their illness or a lack of knowledge about treatment, but because of ineffective systems to keep them safe while receiving care. Variability of care indicates that valuable knowledge is not being shared and implemented widely, so that many patients are receiving care that diverges from best practice.

2. Australian research suggests that around one in every 10 patients suffers a complication of care during their hospital stay, with half of those complications avoidable. Most complications only have a minor impact on patients, but a significant minority end in permanent disability and death.

3. These complications are devastating for patients and families and significantly increase the cost of care across the system. All hospitals should be reducing them as a matter of priority. But doing so is not straightforward. For any health service, the challenge of achieving best practice in safety and quality is immense and requires grappling with clinical autonomy and patient variability. Decision making is all the more difficult because many of the costs of poor care don’t fall on the decision-maker (the hospital) but on patients, their families, other hospitals and the taxpayer more broadly. They can also be hidden, both within hospitals and from patients.

4. Further, complications are rarely the result of individual incompetence or malice. Rather, they arise within complex, high-pressure environments where mistakes easily occur and patients are often already frail and at risk of deteriorating. This inherent risk and complexity is why all hospitals need strong processes to minimise the risk and consequences of human error – and to ensure that when things do go wrong, problems are reported, reviewed and addressed. It is also why hospitals need strong oversight and support by system managers like the department. System managers can protect patients from serious failures in local safety and quality systems by monitoring hospital outcomes for signs of unsafe or low-quality care and by ensuring that hospitals take swift and appropriate action to address deficiencies. System managers can also support hospitals to strengthen the safety and quality of their care by using their vantage point and economies of scale to coordinate, encourage and facilitate improvement efforts across the system.

5. The review panel evaluated the way that the department, firstly, oversees the Victorian hospital system to ensure that it provides consistently safe, high quality care; and secondly, the way it supports hospitals to efficiently and effectively strengthen care. It found that the department is not adequately performing either role.

6. The panel found that the department’s oversight of hospitals is inadequate. It does not have the information it needs to assure the Minister and the public that all hospitals are providing consistently safe and high-quality care. For example, it does not have a functional incident management system for hospital staff to report patient harm. It has over-relied on accreditation when the evidence suggests that is not justifiable. It makes far too little use of the routine data at its disposal to monitor patient outcomes and investigate red flags suggesting poor care. Its expert committees are fragmented and many are not resourced to detect problems in a timely manner or to follow up to stop them happening again.

7. The department’s overarching governance of hospitals is also inadequate. In the public sector, the department expects hospital boards to ensure care is safe and continuously improving. However, it does too little to ensure that all boards are equipped to exercise this function effectively in the first place. In the private sector, where the department’s responsibilities for assuring safety and quality is roughly equivalent, the department relies to an even greater extent on local governance, and conducts no routine monitoring of patient outcomes or serious incidents. In both sectors, the department could and should be doing much more to ensure that hospitals do not provide care when it is outside their capability to do so safely.

8. Finally, the department’s support of hospitals to discharge their responsibilities with respect to safety and quality improvement has been inadequate. There have been fragmented efforts to support improvement but no continuous approach or sustained investment. Hospitals are often left to create their own approach to safety and quality improvement, leading to duplication of work and variation in quality. The department could be doing much more to encourage and facilitate hospitals to learn from each other and to ensure that ideas and innovations from one hospital spread to others.

9. Our review is not the first to identify these problems. Since 2005 the Victorian Auditor-General’s Office has conducted three performance audits on patient safety. The most recent found that the department is not effectively providing leadership or oversight of patient safety, is failing to adequately perform important statewide functions and is not prioritising patient safety. Some of the systematic failures noted in its 2016 audit were first identified over a decade ago in the 2005 audit.

10. The department has suffered a significant loss of capacity in recent years, in some cases creating or exacerbating these problems. Many dedicated departmental staff have called for change but lacked the authority or resources to achieve it. Budget cuts and staffing caps have gutted many departmental functions. The department has become increasingly reliant on external consultancies when the work would have been done better, and more cost-effectively, had the department retained capacity to deliver it in-house. A recent capability review noted the department has struggled to retain talent, so that capable leaders are thinly spread. It found a lack of long-term strategic planning and widespread stakeholder concerns that complacency has caused Victoria’s position as Australia’s leading health system to come into question.

11. The recommendations we have made are designed to change all this. Victoria should be seen as a leader in safety and quality. Our recommendations are broad, across the 10 major themes outlined below. We are confident that all are achievable and affordable. They will help to ensure all Victorians get the best of care. Many aspects of the report can be implemented quickly (within 12 months), some others may take up to three years.

In summary its recommendations are

1. Safety and quality improvement must be a core goal of the department and health system. To achieve this, we have recommended that:

• the Secretary and Minister each make clear public statements about the very high value they place on safety and quality

• the Minister seeks to amend the Health Services Act 1988 to ensure the Act’s objectives reflect this ambition and expectation

• the Secretary makes a clear public statement about the role of the department in the oversight of the health system and her statutory functions

• the Secretary establishes a specialist Office for Safety and Quality Improvement (OSQI) with responsibility for coordinating the efforts of clinical networks and relevant consultative councils and programs to drive system-wide improvement in safety and quality

• the department’s clinical networks set clear and measurable statewide safety and quality improvement goals, with the department publicly reporting on the system’s progress against them

• the department sets clear expectations for boards of all hospitals to have safety and quality as a core focus, with all boards setting and reporting on their progress against local improvement goals

• the department develops a detailed plan and timeline for implementing this report’s recommendations, and reports on progress against it to the Minister on a quarterly basis, with the Victorian Auditor-General’s Office conducting an audit of implementation by 2020.

2. All boards must be highly skilled, independent and effective. To achieve this, we have recommended that:

• the Minister pursues legislative change to extend public health service term-limit requirements and other appointment processes to public hospital boards

• the Minister establishes a Board Appointments Advisory Commission with responsibility for ensuring there is an adequate mix of skills (including substantive clinical governance and consumer representation) on every public hospital and health service board

• the Board Appointments Advisory Commission ensures board skill adequacy by evaluating applicants against an objective and transparent skills assessment framework, by requiring clinical governance training and ongoing development for board directors, by recommending that the Minister supply short-term delegates to boards where the skill mix is inadequate, and by recommending board amalgamation where long-term adequacy of skills cannot be achieved.

3. All hospitals should be held to account for improving safety and quality of care, regardless of their size or sector. To achieve this, we have recommended that:

• the Minister pursues legislative change to extend the statutory obligations for safety and quality in public health services to public hospitals

• the department monitors sentinel events and a common set of broader safety and quality performance indicators across public and private hospitals

• the Minister pursues legislative change to ensure an appropriate level of regulation for private services that are currently unregistered but provide care that carries a risk to patient safety.

4. The flow of information in the health system must ensure deficiencies in care are identified and focus attention on opportunities for improvement. To achieve this, we have recommended that:

• the department makes better use of routine data, registries and complaints data to facilitate and expedite identification and investigation of potential deficiencies in care

• the department streamlines its safety committees to improve information flows between hospitals, committees and the department, reduce duplication of functions, and ensure effective and improvement-focused follow-up of identified deficiencies in care

• the department invests in modern data management systems by expediting the development of a statewide patient identifier and the transition to electronic patient record systems in hospitals

• the Minister establishes a statutory Duty of Candour requiring any person harmed while receiving care to be informed and apologised to

• the department strengthens requirements for boards to report on harm, improvement plans and progress against them in annual quality reports

• the department works to improve voluntary reporting, including by monitoring hospital culture surveys to ensure that staff do not face barriers to reporting, discussing and addressing patient safety risks

• there be stronger obligations for clinical registries to report serious deficiencies in care once they are detected.

5. All hospitals should have access to independent clinical expertise to help identify deficiencies in care and focus attention on opportunities for improvement. To achieve this, we have recommended that:

• the department reinstates Limited Adverse Occurrence Screening so that all smaller hospitals have access to reliable and independent information on safety and quality performance

• all small hospitals develop ongoing partnerships with larger health services to ensure they receive adequate expert support for case audit and other clinical governance activities in all their major clinical streams

• larger health services consider initiating a cycle of regular external reviews of all their clinical units to maintain a focus on continuously improving performance

• all health services be required to recruit an independent expert to sit on their root cause analysis panel when investigating a sentinel event.

6. Risk should be managed across the system so that hospitals only offer care that is within their capabilities, with high-risk care concentrated in the centres where it is safest. To achieve this, we have recommended that:

• for all major areas of hospital clinical practice, the department develops and monitors compliance against capability frameworks delineating, for each hospital, which patients and treatments it has the capability to safely care for

• the clinical networks identify those procedures or treatments for which there is evidence of a material volume–outcome relationship, and the department acts to concentrate delivery of these public and private hospitals’ ‘minimum volume’ procedures and treatments within a designated set of ‘high-volume’ centres.

7. There must be robust assessment of clinical governance and hospital safety and quality performance in the department. To achieve this, we have recommended that:

• the department reduces reliance on hospital accreditation while working through national processes to evolve the accreditation process to a more rigorous one

• the department overhauls its performance assessment framework to ensure there is robust monitoring of safety and quality of care, incorporating risk assessment of hospital governance, as well as culture and patient outcomes

• the department pursues legislative change to make strong performance in safety and quality a standalone requirement of health services rather than something that can be traded off against performance under access and financial dimensions of performance

• the department establishes a formal panel of clinical reviewers who can be called on to undertake clinical reviews where indicated in the revised safety and quality monitoring framework.

8. Mental health services must be adequately funded to allow delivery of timely, safe and high-quality care. To achieve this, we have recommended that:

• the department ensures there is robust reporting and public discussion regarding indicators pertaining to safety, quality and pressure on mental health services

• the department develops a forensic mental health infrastructure sub-plan with a clear timeline to expand medium-security forensic bed capacity and to address other needs including those of adolescent and high-security patients.

9. Clinical leaders must be engaged to strengthen, direct and lead efforts to improve safety and quality of care. To achieve this, we have recommended that:

• the department establishes a Victorian Clinical Council to obtain the collective advice of clinicians on strategic issues

• the department rebuilds the clinical networks to lead safety and quality improvement work, with the network activities and priorities coordinated by the newly formed OSQI and each network accountable for improve statewide safety and quality outcomes on relevant dimensions of hospital care

• the department invests in system-wide clinical leadership by establishing, in partnership with Better Care Victoria, a clinician leadership training strategy that incorporates training in contemporary quality improvement methods for all leaders of significant clinical departments

• the clinical networks work to reduce clinical practice variation in all hospitals, including by developing or sharing best practice protocols for common use

• the CEO of OSQI should have authority to issue best-practice guidelines and protocols on the advice of the clinical networks and the clinical council, and clinicians should be held accountable locally for their appropriate application.

10. The system must have a stronger focus on improving patients’ experience of care. To achieve this, we have recommended that:

• the department holds hospitals accountable for managing care transitions, providing professional interpreter services when required and monitoring progress against goals set by the hospital for continuous improvement of the patient experience

• the department works with the Health Services Commissioner to identify hospitals that are underperforming on dimensions of patient experience including management of complaints

• the OSQI adopts improvement of patient engagement and patient experience as a priority improvement goal for the hospital system.

In Jurecek v Director, Transport Safety Victoria [2016] VSC 285 the Supreme Court of Victoria has dismissed the appeal of a public servant who complained against the alleged breach her employer Transport Safety Victoria of the state's information privacy principles. The employer had collected information from her Facebook account without her knowledge, used in an investigation which resulted in Jurecek being charged and found guilty of the disciplinary offence of misconduct.

The judgment states

This appeal raised important, novel and reasonably arguable questions about the application of the Information Privacy Act in the social media context and in particular about the application of the Information Privacy Principles to personal information on Facebook. Therefore leave to appeal will be granted.

However, the appellant has not established that the tribunal made any legal error in (substantially) dismissing her claim against the respondent for failing to observe its obligations under those Principles. For the reasons given in this judgment, the tribunal did not err in law in deciding that the respondent had (substantially) complied with those obligations. Therefore the appeal must be dismissed.

The appeal considered whether there was an error of law in the decision of Victorian Civil and Administrative Tribunal under the Victorian Civil and Administrative Tribunal Act 1998 (Vic), whether the information was personal information covered by the Information Privacy Principles under the Information Privacy Act 2000 (Vic), whether collection was necessary for the functions or activities of Transport Safety Victoria and carried out in lawful, fair and not unreasonably intrusive way, whether that body ensured Jurecek was made aware of collection as soon as practicable, whether it was reasonably practicable to obtain information from Jurecek directly, whether the information was exempt from the IPP by reason of being contained in document that was generally available publication, and the interaction between privacy protection and other human rights.

Jurecek initially complained, in an application to the state Privacy Commissioner, that during the course of her employment the Director of Transport Safety Victoria (TSV) collected personal information about her without first attempting to obtain it from her directly and then used it without making her aware of what had been obtained. She alleged that TSV had thereby breached the Information Privacy Principles in sch 1 of the Information Privacy Act 2000 (Vic). The Commissioner dismissed the complaints and, at the appellant’s request, referred them to the Victorian Civil and Administrative Tribunal for hearing and determination. The tribunal found the complaints not to be proven and, under s 43(1)(c) of the Act, made orders dismissing the application. Jurecek sought leave to appeal to the Supreme Court and, if leave was granted, to appeal upon grounds of error of law pursuant to s 148(1) and (2) of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) against the orders.

Jurecek was employed in 2012 in the Office of the Director of Transport Safety. There were ongoing difficulties in the nature of alleged workplace bullying, stress and other complaints. The judgment states that

she engaged in chats and posts on Facebook with a workplace colleague in which she made a number of employment-related remarks. These chats and posts were disclosed to officers of the respondent by the appellant’s colleague, which led to an investigation. ... In the investigation, officers or agents of the respondent accessed the appellant’s Facebook, which she operated under a pseudonym (Lora Otto), without her knowledge. The investigation resulted in the appellant being charged and found guilty of the disciplinary offence of misconduct in respect of which she was given a final warning.

Without legal assistance, the appellant made two complaints to the Privacy Commissioner under the Information Privacy Act that the respondent had breached the Information Privacy Principles. In substance, her complaints were that, in the investigative and charging process, the respondent unfairly, intrusively and secretly obtained and used personal information relating to the appellant from her Facebook without it being necessary for the performance of the respondent’s functions and activities, without notice to her and without attempting to obtain the information from her first.

Upon the basis that the respondent had not interfered with the appellant’s privacy or breached the Information Privacy Principles, the Privacy Commissioner rejected these complaints. The Commissioner referred the complaints to the tribunal on the appellant’s request pursuant to s 29(5) of the Information Privacy Act.

Jurecek appears to have made what the Supreme Court unsurprisingly characterised as an "abusive post" on a colleague's Facebook page.

The judgment states

The Information Privacy Principles relevantly apply in relation to the collection, notification and use of personal information. In the application of the Principles, it is important to identify the information, collection, notification (if any) and use that are in question. It is especially important to identify the relevant personal information and the collection, for these are foundational to the application and discharge of the obligations imposed. There may be different items of personal information and multiple collections and these may raise different issues as regards the application and discharge of the obligations. As a self-represented complainant or applicant cannot be expected to appreciate all this, it will often be necessary for the commissioner or the tribunal to give what assistance is due in this connection.

In the present case, the appellant’s complaints, and the tribunal’s determination of those complaints, were organised by reference to chats and posts as modes of social communication rather than by reference to the relevant obligations in the Information Privacy Principles. This reflected the way that the complainant organised her complaints, and understandably so. They were initially prepared by her without legal assistance, as would normally be the case. It was perfectly natural for her to express the complaints in a general way by reference to chats and posts and also perfectly proper for the commissioner and the tribunal generously to interpret the complaints so expressed, as they did.

But the relevant Information Privacy Principles involve the application of standards expressed by reference to collections and notifications (see below) of personal information. At least after the complaints were referred to the tribunal and the parties became legally represented, it would have been better for consideration of the issues to be organised by reference to the information, and the collections and notifications (and other standards), that were in question rather by reference to the chats and posts, for that is what the application of the standards in the Information Privacy Principles ultimately required. I note that the tribunal did attend to the detail of the relevant information and collections in the course of its determination, despite the way in which the appellant put her case (see above). In the appeal, the appellant provided the court with particulars of the personal information, collections and notifications that were in issue. The summary was disputed by the respondent. I deal with the issues that arise in this connection below.

It was common ground in the appeal that the tribunal was correct beneficially to interpret the Information Privacy Principles as human rights legislation and pursuant to s 32(1) of the Charter of Human Rights and Responsibilities Act 2006 (Vic).

13 October 2016

the history of the poorly understood Organized Pseudolegal Commercial Arguments (OPCA) phenomena. Drawing from various reported and unreported sources, the author begins his review in the 1950s with two distinct pseudolegal traditions that evolved separately in both the United States and Canada. Focusing on the prominent members of each era of the OPCA movement, the author explains in depth the concepts behind the movement and what it means for the legal system in Canada today. The article culminates with an analysis of the current OPCA groups and how Canadian courts should respond to future OPCA litigants, while also giving reasons as to why it is important for Canadians to take notice of this movement due to potential security risks.

Netolitzky comments

In 2012 and 2013 a series of events brought public attention to what was a hitherto unrecognized and unexpected phenomenon; there was in Canada a collection of persons who believed they were exempt from or immune to government, law enforcement, and court authority. Instead, these people, who the media generally identified as “Freemen-on-the- Land,” claimed they were outside Canada’s laws. Freemen spokesmen appeared on television and radio, saying they and their peers were the vanguard of a new Canada where the “true” common law would be enforced, and state interference controlled. They would do what they want, and impose their so-called rights on their neighbours.

This was not a peaceful development. A man in Calgary declared that his rental property was an embassy. The house was his alone. He billed his elderly landlady, and threatened that any interference would lead to action by “Territorial Marshals.” Meanwhile, near Grande Prairie, a group of squatters claimed they owned Crown land and would expel intruders and trappers by force. When RCMP officers attempted to search a rural property near Killam, Alberta for illegal firearms, they were forced to retreat after coming under fire from one occupant who wounded two officers, then killed himself. The other occupant, Sawyer Robison, fled the scene with a powerful sniper rifle and body armour. Robison, the target of the warrant, saw himself as outside government authority.

A parallel surprise occurred in the legal community. In 2012, Associate Chief Justice Rooke of the Alberta Court of Queen’s Bench released a 736 paragraph judgment, Meads v. Meads, that collected information from 149 reported judgments where litigants had employed an array of strange legal-sounding but false concepts, which Associate Chief Justice Rooke grouped as Organized Pseudolegal Commercial Arguments (OPCAs). The broadly cited5 Meads decision explained that these ideas were sold on a commercial basis by promoters who promised immunity from taxation, criminal prosecution, government regulation, and free money. Discrete groups used OPCA concepts: the Detaxers, Sovereign Citizens, and the Freemen-on-the-Land. This broad category of vexatious litigation came as a revelation to many in the legal community and academia.

The unmasked OPCA phenomenon also caused a good deal of confusion. Who were these people? What did they want? Why did they express ideas that appear rife with conspiracy, and argued a strange mishmash of domestic and foreign law, legislation, and total fiction? Why did persons who used OPCA schemes not fall into any tidy pattern of political belief, social affiliation, wealth, or intent? Was the appearance of OPCA litigation part of the well- recognized broad entry of self-represented litigants into Canadian courts?

The truth, as it often is, proved complex. OPCA ideas and litigation were not, in fact, something new, but had a history in Canada and the US that traced back for decades. For example, this was old news for government tax lawyers and civil litigators involved in debt collection. OPCA activities were not so much unknown to the courts and legal profession, but instead were clustered, by geography, time, and intent. Fringe communities were incubators for OPCA schemes that periodically expanded into a broader population. Nor was this kind of activity all that uncommon. While Meads was intended to be a comprehensive review, in fact it only captured, at best, about one third of reported Canadian judgments that related to this subject.

OPCA ideas did not represent a legal threat to conventional authority. Canadian courts consistently rejected them. However, these schemes have a social cost: wasted court resources, unnecessary litigation expense, and sometimes devastating negative consequences to those who attempted to implement these schemes. Legal professionals and academics clearly struggled with this broader question of how to respond to the OPCA phenomenon. Context was missing, and instead replaced with guesswork and presumptions. One critical missing element is a historical foundation on which to organize this diverse category of vexatious Canadian litigation activities.

This article attempts, among other things, to construct what in biology is called a phylogeny: a family tree of related existing species and their ancestors. This tool helps explain the interrelationships of those organisms and the selective pressures that led to their appearance, divergence, and extinction. This OPCA phylogeny traces the development of groups, false but allegedly legal concepts, and key personalities. The last category is unusual. Ideas, rather than people, are usually the lynchpin of legal phenomena, but here a small number of critical persons were the direct cause of much of what is encountered today in Canadian courts. These are the OPCA gurus: the conmen who, for a price, assembled and disseminated OPCA concepts to customers who wanted to learn the secrets that would unlock special, supralegal status. To use another biological analogy, these are the Typhoid Marys of the OPCA phenomenon, who spread a disease of ideas as they travelled across Canada, often at great price to their customers, and sometimes, to themselves.

An “OPCA movement” is a group that uses common OPCA strategies and who hold or adopt a shared social perspective and typically conspiratorial alternative history. A person who employs OPCA concepts in court is an “OPCA litigant.” A person who adheres to OPCA concepts but who does not necessarily use those in legal disputes or proceedings is an “OPCA affiliate.” Certain sources estimate there are as many as 30,000 OPCA affiliates in Canada, however the exact source of this number is unclear. In the author’s opinion this overestimates the phenomenon, and a more realistic figure would be an order of magnitude less. This population has, however, generated a considerable volume of litigation, and over 700 reported judgments.

In Meads, Associate Chief Justice Rooke surveyed reported jurisprudence, litigation in the Alberta Court of Queen’s Bench, and other materials received by that Court to develop a context for aspects of the legal, pseudolegal, social, and business characteristics of the OPCA phenomenon. However, that review was necessarily incomplete due to the source material available, and as a consequence provides a useful, but in certain senses fragmentary, landscape of the OPCA phenomenon as a whole and in specific details. Not all known gurus and OPCA movements are identified, and Meads significantly understates the lengthy history of the OPCA phenomenon in Canada.

This article provides a more detailed historical review of the emergence of the OPCA phenomenon in Canada, the general evolution of OPCA movements and their dominant personalities, and the influence of different pseudolegal sources. This investigation relies on a wide range of resources, including reported and unreported jurisprudence, court files, public and social media, and materials created within the OPCA community. The author also draws from his personal experience in relation to this subject as Legal Counsel for the Alberta Court of Queen’s Bench. It is important to stress that the survey which follows is very likely incomplete, as in many instances early OPCA activities are not well documented either in reported case law or by other sources.

The White House's Preparing For The Future of Artificial Intelligence report [PDF] states

As a contribution toward preparing the United States for a future in which Artificial Intelligence (AI) plays a growing role, we survey the current state of AI, its existing and potential applications, and the questions that are raised for society and public policy by progress in AI. We also make recommendations for specific further actions by Federal agencies and other actors.

A companion document called the National Artificial Intelligence Research and Development Strategic Plan lays out a strategic plan for Federally-funded research and development in AI.

Applications of AI for Public Good

One area of great optimism about AI and machine learning is their potential to improve people’s lives by helping to solve some of the world’s greatest challenges and inefficiencies. Many have compared the promise of AI to the transformative impacts of advancements in mobile computing. Public- and private- sector investments in basic and applied R and D on AI have already begun reaping major benefits to the public in fields as diverse as health care, transportation, the environment, criminal justice, and economic inclusion. The effectiveness of government itself is being increased as agencies build their capacity to use AI to carry out their missions more quickly, responsively, and efficiently.

AI and Regulation

AI has applications in many products, such as cars and aircraft, which are subject to regulation designed to protect the public from harm and ensure fairness in economic competition. How will the incorporation of AI into these products affect the relevant regulatory approaches? In general, the approach to regulation of AI-enabled products to protect public safety should be informed by assessment of the aspects of risk that the addition of AI may reduce alongside the aspects of risk that it may increase. If a risk falls within the bounds of an existing regulatory regime, moreover, the policy discussion should start by considering whether the existing regulations already adequately address the risk, or whether they need to be adapted to the addition of AI. Also, where regulatory responses to the addition of AI threaten to increase the cost of compliance, or slow the development or adoption of beneficial innovations, policymakers should consider how those responses could be adjusted to lower costs and barriers to innovation without adversely impacting safety or market fairness.

Currently relevant examples of the regulatory challenges that AI-enabled products present are found in the cases of automated vehicles (AVs, such as self-driving cars) and AI-equipped unmanned aircraft systems (UAS, or “drones”). In the long run, AVs will likely save many lives by reducing driver error and increasing personal mobility, and UAS will offer many economic benefits. Yet public safety must be protected as these technologies are tested and begin to mature. The Department of Transportation (DOT) is using an approach to evolving the relevant regulations that is based on building expertise in the Department, creating safe spaces and test beds for experimentation, and working with industry and civil society to evolve performance-based regulations that will enable more uses as evidence of safe operation accumulates.

Research and Workforce

Government also has an important role to play in the advancement of AI through research and development and the growth of a skilled, diverse workforce. A separate strategic plan for Federally- funded AI research and development is being released in conjunction with this report. The plan discusses the role of Federal R and D, identifies areas of opportunity, and recommends ways to coordinate R&D to maximize benefit and build a highly-trained workforce.

Given the strategic importance of AI, moreover, it is appropriate for the Federal Government to monitor developments in the field worldwide in order to get early warning of important changes arising elsewhere in case these require changes in U.S. policy.

The rapid growth of AI has dramatically increased the need for people with relevant skills to support and advance the field. An AI-enabled world demands a data-literate citizenry that is able to read, use, interpret, and communicate about data, and participate in policy debates about matters affected by AI. AI knowledge and education are increasingly emphasized in Federal Science, Technology, Engineering, and Mathematics (STEM) education programs. AI education is also a component of Computer Science for All, the President’s initiative to empower all American students from kindergarten through high school to learn computer science and be equipped with the computational thinking skills they need in a technology- driven world.

Economic Impacts of AI

AI’s central economic effect in the short term will be the automation of tasks that could not be automated before. This will likely increase productivity and create wealth, but it may also affect particular types of jobs in different ways, reducing demand for certain skills that can be automated while increasing demand for other skills that are complementary to AI. Analysis by the White House Council of Economic Advisors (CEA) suggests that the negative effect of automation will be greatest on lower-wage jobs, and that there is a risk that AI-driven automation will increase the wage gap between less-educated and more- educated workers, potentially increasing economic inequality. Public policy can address these risks, ensuring that workers are retrained and able to succeed in occupations that are complementary to, rather than competing with, automation. Public policy can also ensure that the economic benefits created by AI are shared broadly, and assure that AI responsibly ushers in a new age in the global economy.

Fairness, Safety, and Governance

As AI technologies move toward broader deployment, technical experts, policy analysts, and ethicists have raised concerns about unintended consequences of widespread adoption. Use of AI to make consequential decisions about people, often replacing decisions made by human-driven bureaucratic processes, leads to concerns about how to ensure justice, fairness, and accountability—the same concerns voiced previously in the Administration’s Big Data: Seizing Opportunities, Preserving Values report of 2014, as well as the Report to the President on Big Data and Privacy: A Technological Perspective published by the President’s Council of Advisors on Science and Technology in 2014.2 Transparency concerns focus not only on the data and algorithms involved, but also on the potential to have some form of explanation for any AI-based determination. Yet AI experts have cautioned that there are inherent challenges in trying to understand and predict the behavior of advanced AI systems.

Use of AI to control physical-world equipment leads to concerns about safety, especially as systems are exposed to the full complexity of the human environment. A major challenge in AI safety is building systems that can safely transition from the “closed world” of the laboratory into the outside “open world” where unpredictable things can happen. Adapting gracefully to unforeseen situations is difficult yet necessary for safe operation. Experience in building other types of safety-critical systems and infrastructure, such as aircraft, power plants, bridges, and vehicles, has much to teach AI practitioners about verification and validation, how to build a safety case for a technology, how to manage risk, and how to communicate with stakeholders about risk.

At a technical level, the challenges of fairness and safety are related. In both cases, practitioners strive to avoid unintended behavior, and to generate the evidence needed to give stakeholders justified confidence that unintended failures are unlikely.

Ethical training for AI practitioners and students is a necessary part of the solution. Ideally, every student learning AI, computer science, or data science would be exposed to curriculum and discussion on related ethics and security topics. However, ethics alone is not sufficient. Ethics can help practitioners understand their responsibilities to all stakeholders, but ethical training should be augmented with technical tools and methods for putting good intentions into practice by doing the technical work needed to prevent unacceptable outcomes.

Global Considerations and Security

AI poses policy questions across a range of areas in international relations and security. AI has been a topic of interest in recent international discussions as countries, multilateral institutions, and other stakeholders have begun to access the benefits and challenges of AI. Dialogue and cooperation between these entities could help advance AI R and D and harness AI for good, while also addressing shared challenges.

Today’s AI has important applications in cybersecurity, and is expected to play an increasing role for both defensive and offensive cyber measures. Currently, designing and operating secure systems requires significant time and attention from experts. Automating this expert work partially or entirely may increase security across a much broader range of systems and applications at dramatically lower cost, and could increase the agility of the Nation’s cyber-defenses. Using AI may help maintain the rapid response required to detect and react to the landscape of evolving threats.

Challenging issues are raised by the potential use of AI in weapon systems. The United States has incorporated autonomy in certain weapon systems for decades, allowing for greater precision in the use of weapons and safer, more humane military operations. Nonetheless, moving away from direct human control of weapon systems involves some risks and can raise legal and ethical questions.

The key to incorporating autonomous and semi-autonomous weapon systems into American defense planning is to ensure that U.S. Government entities are always acting in accordance with international humanitarian law, taking appropriate steps to control proliferation, and working with partners and Allies to develop standards related to the development and use of such weapon systems. The United States has actively participated in ongoing international discussion on Lethal Autonomous Weapon Systems, and anticipates continued robust international discussion of these potential weapon systems. Agencies across the U.S. Government are working to develop a single, government-wide policy, consistent with international humanitarian law, on autonomous and semi-autonomous weapons.

Preparing for the Future

AI holds the potential to be a major driver of economic growth and social progress, if industry, civil society, government, and the public work together to support development of the technology with thoughtful attention to its potential and to managing its risks.
The U.S. Government has several roles to play. It can convene conversations about important issues and help to set the agenda for public debate. It can monitor the safety and fairness of applications as they develop, and adapt regulatory frameworks to encourage innovation while protecting the public. It can provide public policy tools to ensure that disruption in the means and methods of work enabled by AI increases productivity while avoiding negative economic consequences for certain sectors of the workforce. It can support basic research and the application of AI to public good. It can support development of a skilled, diverse workforce. And government can use AI itself to serve the public faster,
more effectively, and at lower cost. Many areas of public policy, from education and the economic safety net, to defense, environmental preservation, and criminal justice, will see new opportunities and new challenges driven by the continued progress of AI. The U.S. Government must continue to build its capacity to understand and adapt to these changes.

As the technology of AI continues to develop, practitioners must ensure that AI-enabled systems are governable; that they are open, transparent, and understandable; that they can work effectively with people; and that their operation will remain consistent with human values and aspirations. Researchers and practitioners have increased their attention to these challenges, and should continue to focus on them.
Developing and studying machine intelligence can help us better understand and appreciate our human intelligence. Used thoughtfully, AI can augment our intelligence, helping us chart a better and wiser path forward.

The recommendations are

Recommendation 1: Private and public institutions are encouraged to examine whether and how they can responsibly leverage AI and machine learning in ways that will benefit society. Social justice and public policy institutions that do not typically engage with advanced technologies and data science in their work should consider partnerships with AI researchers and practitioners that can help apply AI tactics to the broad social problems these institutions already address in other ways.

Recommendation 2: Federal agencies should prioritize open training data and open data standards in AI. The government should emphasize the release of datasets that enable the use of AI to address social challenges. Potential steps may include developing an “Open Data for AI” initiative with the objective of releasing a significant number of government data sets to accelerate AI research and galvanize the use of open data standards and best practices across government, academia, and the private sector.

Recommendation 3: The Federal Government should explore ways to improve the capacity of key agencies to apply AI to their missions. For example, Federal agencies should explore the potential to create DARPA-like organizations to support high-risk, high-reward AI research and its application, much as the Department of Education has done through its proposal to create an “ARPA-ED,” to support R and D to determine whether AI and other technologies could significantly improve student learning outcomes.

Recommendation 4: The NSTC MLAI subcommittee should develop a community of practice for AI practitioners across government. Agencies should work together to develop and share standards and best practices around the use of AI in government operations. Agencies should ensure that Federal employee training programs include relevant AI opportunities.

Recommendation 5: Agencies should draw on appropriate technical expertise at the senior level when setting regulatory policy for AI-enabled products. Effective regulation of AI-enabled products requires collaboration between agency leadership, staff knowledgeable about the existing regulatory framework and regulatory practices generally, and technical experts with knowledge of AI. Agency leadership should take steps to recruit the necessary technical talent, or identify it in existing agency staff, and should ensure that there are sufficient technical “seats at the table” in regulatory policy discussions.

Recommendation 6: Agencies should use the full range of personnel assignment and exchange models (e.g. hiring authorities) to foster a Federal workforce with more diverse perspectives on the current state of technology.

Recommendation 7: The Department of Transportation should work with industry and researchers on ways to increase sharing of data for safety, research, and other purposes. The future roles of AI in surface and air transportation are undeniable. Accordingly, Federal actors should focus in the near-term on developing increasingly rich sets of data, consistent with consumer privacy, that can better inform policy-making as these technologies mature.

Recommendation 8: The U.S. Government should invest in developing and implementing an advanced and automated air traffic management system that is highly scalable, and can fully accommodate autonomous and piloted aircraft alike.

Recommendation 9: The Department of Transportation should continue to develop an evolving framework for regulation to enable the safe integration of fully automated vehicles and UAS, including novel vehicle designs, into the transportation system.

Recommendation 10: The NSTC Subcommittee on Machine Learning and Artificial Intelligence should monitor developments in AI, and report regularly to senior Administration leadership about the status of AI, especially with regard to milestones. The Subcommittee should update the list of milestones as knowledge advances and the consensus of experts changes over time. The Subcommittee should consider reporting to the public on AI developments, when appropriate.

Recommendation 11: The Government should monitor the state of AI in other countries, especially with respect to milestones.

Recommendation 12: Industry should work with government to keep government updated on the general progress of AI in industry, including the likelihood of milestones being reached soon.

Recommendation 13: The Federal government should prioritize basic and long-term AI research. The Nation as a whole would benefit from a steady increase in Federal and private-sector AI R and D, with a particular emphasis on basic research and long-term, high-risk research initiatives. Because basic and long-term research especially are areas where the private sector is not likely to invest, Federal investments will be important for R and D in these areas.

Recommendation 14: The NSTC Subcommittees on MLAI and NITRD, in conjunction with the NSTC Committee on Science, Technology, Engineering, and Education (CoSTEM),, should initiate a study on the AI workforce pipeline in order to develop actions that ensure an appropriate increase in the size, quality, and diversity of the workforce, including AI researchers, specialists, and users.

Recommendation 15: The Executive Office of the President should publish a follow-on report by the end of this year, to further investigate the effects of AI and automation on the U.S. job market, and outline recommended policy responses.

Recommendation 16: Federal agencies that use AI-based systems to make or provide decision support for consequential decisions about individuals should take extra care to ensure the efficacy and fairness of those systems, based on evidence-based verification and validation.

Recommendation 17: Federal agencies that make grants to state and local governments in support of the use of AI-based systems to make consequential decisions about individuals should review the terms of grants to ensure that AI-based products or services purchased with Federal grant funds produce results in a sufficiently transparent fashion and are supported by evidence of efficacy and fairness.

Recommendation 18: Schools and universities should include ethics, and related topics in security, privacy, and safety, as an integral part of curricula on AI, machine learning, computer science, and data science.

Recommendation 19: AI professionals, safety professionals, and their professional societies should work together to continue progress toward a mature field of AI safety engineering.

Recommendation 20: The U.S. Government should develop a government-wide strategy on international engagement related to AI, and develop a list of AI topical areas that need international engagement and monitoring.

Recommendation 21: The U.S. Government should deepen its engagement with key international stakeholders, including foreign governments, international organizations, industry, academia, and others, to exchange information and facilitate collaboration on AI R and D.

Recommendation 22: Agencies’ plans and strategies should account for the influence of AI on cybersecurity, and of cybersecurity on AI. Agencies involved in AI issues should engage their U.S. Government and private-sector cybersecurity colleagues for input on how to ensure that AI systems and ecosystems are secure and resilient to intelligent adversaries. Agencies involved in cybersecurity issues should engage their U.S. Government and private sector AI colleagues for innovative ways to apply AI for effective and efficient cybersecurity.

Recommendation 23: The U.S. Government should complete the development of a single, government- wide policy, consistent with international humanitarian law, on autonomous and semi-autonomous weapons.

The US Federal Trade Commission has released Patent Assertion Entity Activity - A FTC Study [PDF].

The report states

Patent assertion entities (PAEs) are businesses that acquire patents from third parties and seek to generate revenue by asserting them against alleged infringers. PAEs monetize their patents primarily through licensing negotiations with alleged infringers, infringement litigation, or both. In other words, PAEs do not rely on producing, manufacturing, or selling goods. When negotiating, a PAE’s objective is to enter into a royalty-bearing or lump-sum license. When litigating, to generate any revenue, a PAE must either settle with the defendant or ultimately prevail in litigation and obtain relief from the court.

In acquiring and then asserting patents, PAEs target individuals and businesses that already use (at least allegedly) the patented technology. PAE activity therefore results in what often are referred to as ex post patent transactions because any patent license or settlement occurs after someone has developed or marketed the product at issue. This contrasts with ex ante patent transactions in which the technology and related patent rights transfer from an inventor to a manufacturer before the product is developed and marketed. The fact that PAE activity facilitates ex post, as opposed to ex ante, patent transactions has raised policy questions about the role of PAEs in promoting innovation and economic growth.

To begin answering these questions, researchers at several government agencies and academic institutions have studied PAE business models to evaluate the specific impact on patent litigation.

These studies have focused on publicly observable litigation behavior and relied on publicly available litigation data. A deeper understanding of PAE business models, however, requires consideration of behavior that is not publicly observable or available, such as how the entities structure and organize themselves, or their confidential acquisition and licensing terms and data.

The Federal Trade Commission has authority under Section 6(b) of the Federal Trade Commission Act to collect confidential business information and conduct industry studies. We used our authority to study PAE acquisition, litigation, and licensing practices because more data on and analysis of the non-public aspects of PAE business models can enhance the quality of the policy dialogue. Furthermore, to better understand how PAE business models compare with other business models that utilize patent licensing, we conducted a more specific study of the wireless chipset sector, in which not only PAEs, but other non-practicing entities (NPEs) and wireless chipset manufacturers (Wireless Manufacturers) assert wireless-technology patents.

In the general PAE study, the FTC analyzed information from 22 Responding PAEs and over 2,500 of both their Affiliates and other related entities. As explained below, the FTC observed two distinct PAE business models: Portfolio PAEs and Litigation PAEs. Table A.1 provides an overview of the various categories of PAEs discussed in this Report.

We examined the practices of each of these respondents across an almost six-year period between January 2009 and mid-September 2014. Of the related entities, 327 engaged in active assertion behavior, namely, sending demands, suing for patent infringement, or licensing patents, during the study period. In the wireless chipset case study, the FTC compared the behavior of PAEs active in the wireless chipset sector with eight manufacturers and five NPEs that asserted patents in this sector. This report describes our major findings from the study and makes recommendations for future reform.

It states key findings -

The FTC observed two distinct PAE business models: Portfolio PAEs and Litigation PAEs. From the information and data collected from the PAE respondents, we observed two distinct PAE business models for generating revenue through patent assertion: Portfolio PAEs and Litigation PAEs. Within each business model, Study PAE behavior was relatively homogeneous.

 Portfolio PAEs: Portfolio PAEs negotiated licenses covering large portfolios, often containing hundreds or thousands of patents, frequently without first suing the alleged infringer. The value of these licenses was typically in the millions of dollars. Although Portfolio PAEs accounted for only 9% of the reported licenses in the study, they generated 80% of the reported revenue, or approximately $3.2 billion. Portfolio PAEs typically funded their initial patent acquisitions through capital raised from investors, including institutional investors or manufacturing firms.

 Litigation PAEs: Litigation PAEs typically sued potential licensees and settled shortly afterward by entering into license agreements with defendants covering small portfolios, often containing fewer than ten patents. The licenses typically yielded total royalties of less than $300,000. According to one estimate, $300,000 approximates the lower bound of early-stage litigation costs of defending a patent infringement suit. Given the relatively low dollar amounts of the licenses, the behavior of Litigation PAEs is consistent with nuisance litigation. For each separate patent portfolio that they acquired, Litigation PAEs characteristically created a new affiliate entity, which often held ten patents or less. They generally operated with little or no working capital and relied on agreements to share future revenue with patent sellers to fund their businesses. Litigation PAEs filed 96% of the cases in the study and accounted for 91% of the reported licenses, but only 20% of the reported revenue, or approximately $800 million.

 Portfolio PAE licenses generated total royalties that were much larger, on average, than those of Litigation PAE licenses. There was little overlap in the royalties generated by Litigation PAE and Portfolio PAE licenses. Seventy-seven percent of Litigation PAE licenses generated royalties of less than $300,000 per license, and 94% generated royalties of less than $1 million per license. By contrast, 65% of Portfolio PAE licenses generated royalties of greater than $1 million per license, and 10% generated royalties of greater than $50 million per license.
The FTC did not observe demand-letter campaigns that, on their own, generated low-revenue licenses. In addition to negotiating licenses and initiating infringement litigation, PAEs may assert their patents by demanding that a target take a license from them. Often these demands take the form of a “demand letter.”

The FTC did not observe Study PAEs successfully generating low-revenue licenses by sending demands, but not suing the target. This suggests that demand-letter reform, on its own, would not fully address the potential negative repercussions of PAE activity.
Instead, most licenses in the sample followed a patent infringement suit against the alleged infringer. Consistent with the fact that Litigation PAEs accounted for 91% of reported licenses, patent infringement suits against the eventual licensee preceded 87% of the licenses in the sample. Litigation preceded 93% of Litigation PAE licenses, but just 29% of Portfolio PAE licenses. Because a significant portion of observed PAE activity passed through the courthouse doors, further analyses of publicly available litigation data likely would be beneficial.

Study PAEs focused on acquiring and asserting Information and Communication Technology (ICT) patents. Of all the patents held by PAEs in the FTC’s study, 88% fell under the Computers and Communications or Other Electrical & Electronic technology categories, and more than 75% of the Study PAEs’ overall holdings were software-related patents.

Although Study PAEs overwhelmingly held ICT and software patents, they asserted those patents against firms in a broad range of industries, including “Retail Trade.” More than 17% of demand recipients, 10% of litigation defendants, and 13% of licensees identified in the study operated in the “Retail Trade” industry, which includes both store retailers that operate fixed point-of-sale operations and non-store retailers, such as Internet merchants that directly sell products.10 Given that most of the patents asserted by Study PAEs were ICT patents, the presence of retailers among the targets of assertion activity in the study suggests that Study PAEs asserted their patents not only against manufacturers of the accused products, but also against firms that were end-users of the products. This finding supports anecdotal evidence that end-users are frequently PAE targets.

Although most Study PAE targets had just one encounter with any Study PAE, a small number of entities were frequent targets of Study PAE activity. Within each category of assertion behavior (demand, litigation, and licensing), most of the observed activity involved a single instance of assertion by any Study PAE against a target. For example, during the study period, 73% of the assertion targets were defendants in only one lawsuit brought by any of the 256 Study PAEs that filed infringement suits, and 13% of the assertion targets were defendants in two lawsuits. Nevertheless, a small number of firms reported multiple encounters with Study PAEs. Of the firms that received demands from Study PAEs, 2% received more than five demands, and one firm received 17 demands. Of the firms that reported licenses with Study PAEs, 2% had licenses with more than nine separate Study PAEs.

Study PAEs disproportionately asserted patents against a relatively small number of firms. These firms most frequently operated in the “Computer & Electronic Product Manufacturing” industry. Indeed, firms in the “Computer & Electronic Product Manufacturing” industry accounted for more than half of the top 25 firms that (1) received the largest number of demands from Study PAEs, (2) were sued most frequently by Study PAEs, or (3) paid the largest royalties to Study PAEs. In addition, while not necessarily receiving the most demands, the top 25 firms that paid the highest amount of license royalties to Study PAEs accounted for 69% of the royalties observed in the study.

In the wireless chipset sector, Litigation PAEs and Wireless Manufacturers asserted patents differently. In the Wireless Case Study, the FTC examined the patent assertion activities of PAEs, NPEs, and manufacturers in the wireless chipset sector to understand better how different business models might affect assertion behavior in the same technological space. We observed that Wireless Manufacturers sent demand letters before executing licenses, while Litigation PAEs sued before licensing their patents. Wireless Manufacturers and NPEs also sent nearly three times as many demand letters as all of the Study PAEs combined. Litigation PAEs brought nearly two-and-a-half times as many patent infringement cases involving wireless patents as Wireless Manufacturers (which collectively accounted for approximately 90% of worldwide chipset sales), NPEs, and Portfolio PAEs combined.

A number of scholars have expressed concerns that, because PAEs likely face lower costs and fewer risks of asserting their patents than other patent holders, such as manufacturers, PAEs more aggressively assert their patents. In particular, these scholars are concerned that lower litigation costs may allow PAEs to obtain higher royalties than a manufacturer or NPE would receive. In the Wireless Case Study, the FTC found that Study PAEs were more likely to assert their patents through litigation than were Wireless Manufacturers. For example, 30% of Portfolio PAE wireless patent licenses and nearly 90% of Litigation PAE wireless patent licenses resulted from litigation, while only 1% of Wireless
Manufacturer wireless patent licenses resulted from litigation. The FTC, however, has not attempted to determine if the royalties received by Study PAEs were higher or lower than those that the original assignees of the licensed patents could have earned. The FTC did not have the data to estimate reliably the royalties the original assignee would have received for the patents ultimately licensed by a Study PAE.

Study PAEs had diverse and heterogeneous data-keeping practices. As a result, the FTC does not report how much revenue PAEs shared with others, including independent inventors, or the costs of assertion activity. The FTC sought to evaluate the role of PAE activity in promoting patent monetization for inventors and innovation as part of its study. Towards that end, the FTC requested that Responding PAEs provide detailed data describing how they shared licensing revenue with outside parties and their costs of patent assertion. Responding PAEs used different methods to maintain information describing their revenue sharing and costs, however, which prevented any meaningful comparison of the degree of revenue sharing by PAEs or their assertion costs.

For example, some Responding PAEs viewed payments to outside counsel as a cost of patent assertion, but others viewed such payments as revenue sharing (counsel often received a fixed proportion of licensing royalties). Moreover, the majority of Responding PAEs did not maintain information on assertion costs, and only a few Responding PAEs provided such data at either the Affiliate level or assertion campaign level.14 For these reasons, we did not analyze either the proportion of licensing revenue that they shared with outside parties, or the costs of patent assertion. Due to this limited data, this report does not address the efficiency of PAE business models.

Recommendations for Legislative and Judicial Reform

As observed in the study, infringement lawsuits filed against targets played a key role in the viability and success of the Litigation PAE business model. Ninety-three percent of reported Litigation PAE licenses followed a lawsuit against the eventual licensee and 77% were valued at less than the estimated cost of defending a patent lawsuit through the end of discovery—a threshold below which litigation settlements might be considered nuisance value. In addition, when licenses followed litigation, those
litigations tended to settle early; of the cases that settled, 34% did so within six months of filing, 66% within one year, and 83% within 18 months. Although Litigation PAEs generated a minority of the reported PAE licensing revenues in the study, they accounted for the vast majority of total lawsuits filed.

The FTC recognizes that infringement litigation plays an important role in protecting patent rights, and that a robust judicial system promotes respect for the patent laws. Nuisance infringement litigation, however, can tax judicial resources and divert attention away from productive business behavior. With this balance in mind, the FTC proposes reforms to: 1) address discovery burden and cost asymmetries in PAE litigation; 2) provide the courts and defendants with more information about the plaintiffs that have filed infringement lawsuits; 3) streamline multiple cases brought against defendants on the same theories of infringement; and 4) provide sufficient notice of these infringement theories as courts continue to develop heightened pleading requirements for patent cases.

Develop rules and case management practices to address discovery burden and cost asymmetries in PAE litigation. In civil lawsuits, plaintiffs and defendants exchange information relevant to the litigation through disclosures and responses to discovery requests. The Federal Judicial Center notes that discovery in patent litigation “can be exhaustive and exhausting for a variety of reasons,” including broad claims and defenses which require inquiry into product development and financial records, special issues that arise with willfulness and inequitable conduct claims, and “potentially consequential but unpredictable outcome[s]” that can lead to extensive discovery requests and lack of compromise.

Because PAEs do not invent, develop, or manufacture products incorporating their patented technology, they generally have less discoverable information than the party accused of infringement

They also are not subject to countersuit for patent infringement, and therefore do not face potential discovery relating to infringement counterclaims. A PAE may thus be able to subject a defendant to exhaustive discovery requests while itself facing a relatively light discovery burden. This asymmetry in discovery burden can give PAEs an advantage in litigation. As discussed above, Litigation PAEs settled 66% of their cases within 12 months, and settlements frequently involved lump-sum license payments valued at less than $300,000. The American Intellectual Property Law Association (AIPLA), which periodically surveys the costs of patent litigation, recently reported that defending an NPE patent lawsuit through the end of discovery costs between $300,000 and $2.5 million, depending on the amount in controversy. By this estimate, 77% of Litigation PAEs’ settlements fell below a de facto benchmark for the nuisance cost of litigation. This suggests that discovery costs, and not the technological value of the patent, may set the benchmark for settlement value in Litigation PAE cases.

Because defendants frequently paid less than the estimated value of discovery costs to settle litigation with Study PAEs, and because there is asymmetry in discovery burden between PAE plaintiffs and defendants, Congress, the Judicial Conference of the United States, and individual courts should promote case management practices that take these costs and asymmetries into account. One step toward achieving this goal would be to amend Federal Rule of Civil Procedure 26, which addresses discovery in civil actions, in a way that helps balance these relative burdens. Rule 26 requires parties to meet and confer to discuss, among other things, a plan for discovery. Early disclosure of asserted claims and infringement and invalidity contentions in PAE litigation would help to balance the asymmetries of plaintiff and defendant-side discovery costs. Likewise, measures that would limit discovery before preliminary motions together with provisions to ensure that such motions are decided
in a timely manner would help alleviate the asymmetry problem. Furthermore, early disclosure of damages theories would flag potential legal issues for summary judgment motions and provide more information for settlement discussions. In general, any measures that reduce discovery burden and costs while ensuring discovery of information appropriate to the case should be considered.

Amend Federal Rule of Civil Procedure 7.1 to reach a broader range of non-party interested entities or persons. Federal Rule of Civil Procedure 7.1 requires all nongovernmental corporate parties to identify “any parent corporation and any publicly held corporation owning 10% or more of its stock” in its “first appearance, pleading, petition, motion, response, or other request addressed to the court.” The purpose of the rule is to “reach a majority of the circumstances that are likely to call for [judicial] disqualification on the basis of financial information that a judge may not know or recollect.” The FTC observed significant variation in how multi-affiliate Litigation PAEs organized their affiliate companies, many of which existing Rule 7.1 would not cover. To provide defendants and the judiciary with a better understanding of financial relationships relating to firms that may appear in the courtroom, Congress and the Judicial Conference should expand the reportable relationships under Rule 7.1.

Establish procedures encouraging courts to stay a PAE’s infringement action against a customer or end-user, where the PAE has also sued the manufacturer of the accused product under the same theory of infringement. The FTC observed that a significant proportion of PAE targets in the study did not appear to manufacture the allegedly infringing product. For example, Litigation PAEs filed over 15% of their cases against defendants in the “Retail Trade” industry. The Patent Act allows a patent holder to recover from anyone who “uses” the patented invention. Nevertheless, simultaneous litigation by a PAE against a manufacturer and its customers on the same theory of infringement can impose unnecessary judicial and private costs. Should the patent be invalidated in one case, for example, it would make further litigation in the other cases unnecessary. The manufacturer of an accused product typically has a much better understanding of the disputed technology and thus typically is in a better position to defend against the infringement suit than is a customer or retailer. And it is also more likely to have discoverable evidence because it produces the accused product.

Accordingly, to address situations where a PAE sues a manufacturer and its customers on the same theory of infringement, Congress and the Judicial Conference should enact provisions that encourage a district court to stay actions against end-users until the manufacturer suit has been resolved.

As courts continue to address the “plausibility” of pleadings in patent cases, ensure that patent infringement complaints provide sufficient notice to accused infringers. Until the end of 2015, a patent holder could file a complaint in district court by making simple allegations regarding its patent ownership and the defendant’s infringement. The patent holder did not need to identify any claims that were allegedly infringed, or list any accused products. This standard, based on a federal form for pleading patent infringement, applied to all of the infringement claims made by Study PAEs during the FTC’s study period.

In December 2015, however, an amendment to the Federal Rules of Civil Procedure abrogated the use of this form for patent cases. Patent holders, following the pleading standard articulated by the Supreme Court for civil cases generally, now must plead factual allegations that make infringement “plausible.” Because Litigation PAEs generate licensing revenue primarily through litigation, requiring more particularity in a complaint can provide defendants with more information with which to evaluate the nature and scope of their accused infringement. As the courts continue to develop the plausibility standard in patent cases, they should continue to consider the benefits of pleadings that provide sufficient notice to accused infringers.

The FTC concludes

The FTC took its first in-depth look at PAE activity in the hearings leading up to its 2011 report examining technology markets and patent markets: The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition. As the Commission recognized then, consistent with our earlier examinations of patent policy, the patent system makes important contributions to innovation, consumer welfare, and U.S. prosperity, in part because of the patent holder’s right to exclude.

Further investigation of the PAE business model, including a workshop in 2012,33 led the Commission to initiate this study—the first use of its Section 6(b) authority to investigate transactions in the intellectual property marketplace. The research presented in this report uses both public and non-public information to shed new light on PAE business models, including detailed data describing PAE assertion behavior and patent holdings.

Based on the overall findings of this study and consistent with the FTC’s history of recommending improvements to patent law to facilitate the benefits of patent rights, while minimizing practices that can “discourag[e] follow-on innovation, prevent[] competition, and rais[e] prices through unnecessary litigation and licensing,” the FTC recommends that policymakers address PAE litigation asymmetries through procedural and substantive reform.

'Victims, vectors and villains: are those who opt out of vaccination morally responsible for the deaths of others?' by Euzebiusz Jamrozik, Toby Handfield and Michael J Selgelid in (2016) JME comments

Mass vaccination has been a successful public health strategy for many contagious diseases. The immunity of the vaccinated also protects others who cannot be safely or effectively vaccinated—including infants and the immunosuppressed. When vaccination rates fall, diseases like measles can rapidly resurge in a population. Those who cannot be vaccinated for medical reasons are at the highest risk of severe disease and death. They thus may bear the burden of others' freedom to opt out of vaccination. It is often asked whether it is legitimate for states to adopt and enforce mandatory universal vaccination. Yet this neglects a related question: are those who opt out, where it is permitted, morally responsible when others are harmed or die as a result of their decision? In this article, we argue that individuals who opt out of vaccination are morally responsible for resultant harms to others. Using measles as our main example, we demonstrate the ways in which opting out of vaccination can result in a significant risk of harm and death to others, especially infants and the immunosuppressed. We argue that imposing these risks without good justification is blameworthy and examine ways of reaching a coherent understanding of individual moral responsibility for harms in the context of the collective action required for disease transmission. Finally, we consider several objections to this view, provide counterarguments and suggest morally permissible alternatives to mandatory universal vaccination including controlled infection, self-imposed social isolation and financial penalties for refusal to vaccinate.

The authors argue

Vaccine-preventable infectious diseases
Many vaccine-preventable infections are transmitted between human beings and can cause serious harm or death. Measles, for example, is one of the most infectious known human viruses. It is transmitted via the airborne route, and outbreaks can result from minimal social contact between contagious and susceptible individuals. In most people, measles causes mild disease, but in some cases there are serious sequelae including lung inflammation (pneumonitis), brain inflammation (encephalitis), permanent disability and death. US historical data suggest a death rate of about 1 in every 350–1200 cases. Risks of both complications and death are highest in infants, young children, the malnourished and the immunosuppressed. Prior to widespread measles vaccination, there were, on average, 500 000 cases of measles and 400 deaths per year in the USA.1 Measles previously also accounted for a significant proportion of deaths among young people undergoing chemotherapy for leukaemia. Currently, measles continues to cause 100 000 deaths per year worldwide—mostly in children under 5 years of age in sub-Saharan Africa and India, in communities where vaccination rates remain suboptimal.

Modern inoculations for many common diseases are extremely safe and effectively prevent illness in the vast majority of those vaccinated. Vaccines have played a major role in the eradication of smallpox and near eradication of polio. High rates of vaccination against such diseases also protect those who cannot be safely vaccinated, such as infants and the immunosuppressed, through promotion of herd protection (or ‘herd immunity’). The measles vaccine is especially safe and effective, with significant side effects from vaccination being exceedingly rare. A careful long-term follow-up study of measles, mumps, and rubella (MMR) vaccination found zero deaths due to the vaccine and a less than one in a million chance of encephalitis.

There are several groups that cannot be safely or effectively vaccinated with some vaccines (eg, infants, the immunodeficient and the immunosuppressed). The only way these vulnerable individuals can be effectively protected against common infections, apart from extremely onerous social isolation (eg, ‘boy in a bubble’ scenarios), is through herd protection (achieved by high vaccination rates).ii Herd protection models for measles suggest that well over 90% of a population need to be vaccinated in order to reliably prevent sustained transmission. Recent outbreaks have shown that measles can spread quickly and cause significant harm when vaccination rates fall. The presence of such vulnerable individuals raises questions as to whether these people should bear the burdens of the decisions of others not to vaccinate and to what degree the latter should be considered morally responsible for resultant harms to the former.

In this article, we propose that those who opt out of vaccination are morally responsible (and in particular, blameworthy) for the harms suffered by others as a result of infectious outbreaks. In other words, non-vaccinators are morally blameworthy for the morbidity and mortality caused by infectious diseases that can be prevented by vaccination. Exactly how blame should in practice be apportioned among different individuals is a question that is beyond the scope of this article to resolve: but we show that there is at least one plausible and morally defensible way that blame could be ascribed to non-vaccinators. If our argument is sound, it joins other significant grounds that support public health intervention in this area.

We focus on the example of measles because it is highly contagious in social situations where people merely share the same air. Similar considerations apply to many other common infections transmitted in similar ways, but we leave aside diseases with other modes of transmission, noting that these differences and their moral aspects have received some attention elsewhere.

One way to support our thesis would be to analyse the concept of moral responsibility so as to identify sufficient conditions, and then to show that these conditions apply to non-vaccinators and the harms they cause. While we think this route is defensible, it is difficult to frame in a way that is not question-begging. Any account of sufficient conditions (for moral responsibility) that supports our conclusion is likely to be more contentious than the conclusion itself.

Instead, we adopt the following, two-pronged strategy. First, we simply conjecture that non-vaccinators are responsible for harms and present some relatively uncontentious necessary conditions of moral responsibility. We consider some possible objections to our responsibility thesis, organised around these conditions, and show that they all fail. Thus, we show that there is no knockdown objection to our claim. Second, we argue that there are a number of cases where we do in fact consider individuals blameworthy for harms that bear important similarities to the harms caused by non-vaccinators. The legitimacy of considering individuals responsible in these other cases suggests that it is analogously legitimate to consider non-vaccinators responsible.

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